sectoral economic costs and benefits of ghg mitigation - IPCC

Fossil Fuels
Table 7
Changes in Global GDP with and without Emissions Trading
Change in Global GDP
Mechanism
Marginal Cost
(1995$ ton c)
% Change in Real Income
Base Case (without Kyoto) 0 ~ 2.5%/yr a ; ~ 45% growth by 2010
Domestic implementation only 41 – 762 b -0.2 to -2% in 2010 c ; (growth of ~ 43-44%)
A-1 mechanisms 18 – 160 b >0.5% in 2010; (growth of ~ 45%)
a
income growth is taken from BaU scenario in OECD GREEN model
b
range of marginal costs is taken from OECD review of WorldScan, GREEN, G-Cubed, EMF16, Merge, AIM,
POLES and GTEM models; values cover the full range of marginal costs in the USA, Western Europe and Japan.
c
change in real income is derived from range as in note (b) above, it represents total cost as a percentage reduction of
real income in 2010.
Table 8
Losses to Oil Exporting Countries from Kyoto Implementation
Selected Models Modeled Losses to Oil Exporting Countries from Reference Case
Without trading With Annex-I Trading With “Global Trading”
G-Cubed a 25% oil revenue decline 13% oil revenue decline 7% oil revenue decline
GREEN b 3% real income loss “substantially reduced n/a
loss”
GTEM c 0.2% decline in GDP GDP decline < 0.05% n/a
MS-MRT d 1.39% welfare loss 1.15% welfare loss 0.36% welfare loss
OPEC Model e
17% OPEC revenue
decline
10% OPEC revenue
decline
8% OPEC revenue
decline
a
G-Cubed results based on OPEC category, based on results presented in “Emissions Trading, Capital Flows and the
Kyoto Protocol”, in Weyant, et al, eds., 1999: The Cost of the Kyoto Protocol: A Multi-Model Evaluation, A Special
Issue of the Energy Journal.
b
GREEN model includes “oil exporting country” category, based results presented in Burniaux and O’Brien, 1999.
Working Party No. 1 Paper: Taking Action Against Climate Change: the Kyoto Protocol
c GTEM results based only on Mexico and Indonesia; OPEC data not provided separately; based on results presented in
“The Kyoto Protocol: An Economic Analysis Using GTEM”, in Weyant, et al, eds., 1999: The Cost of the Kyoto
Protocol: A Multi-Model Evaluation, A Special Issue of the Energy Journal.
d
MS-MRT based on“Mexico and OPEC” category, based on results presented in “Effects of Restrictions on
International Permit Trading: The MS-MRT Model”, in Weyant, et al, eds., 1999: The Cost of the Kyoto Protocol: A
Multi-Model Evaluation, A Special Issue of the Energy Journal.
e
In OPEC Review, June 1999. “The impact of emissions trading on OPEC Member Countries” by Ghanem, Lounnas
and Brennand
A number of recent studies, based on a variety of different models (see box on Economic Models
on page 3), have evaluated the relative costs of implementing Kyoto both with and without the
use of the Kyoto Mechanisms (see Table 7). In most cases, the coal exporting developing
countries are not of sufficient size to be modeled individually, so specific consequences for coal
exporters cannot be reflected. For comparison, it is useful to note that the IEA World Energy
Outlook projects the crude oil price to remain stable at about US $17 per barrel through 2010,
that oil demand is projected to increase at about 2% per year, while oil demand in the transport
sector is projected to increase at about 2.6% per year.
Considering the various models that have been applied to the OPEC or oil exporting regions
provides a somewhat more detailed analysis of possible impacts – both with and without the use
of the flexibility mechanisms (See Table 8). Again, for comparative purposes, the World Energy
Outlook projects, in its baseline case, that the Middle East will experience economic growth rates
of approximately 2.7% per year – or nearly 50% over the period from 1995 to 2010. Thus, in the
worst case scenario, and assuming that declining oil revenues are not offset at all, growth would
still be at approximately 35% or more over the period.
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